Why are some resource-rich countries more sophisticated than others? The role of the regime type and political ideology

This study examines the effects of natural resource abundance on economic complexity using a large panel dataset of 108 countries from 1995 to 2017. In addition, it examines whether this relationship is influenced by the type of democratic regime and political ideology. The empirical analysis is based on the generalized method of moments (GMM), and the following results are established: (i) Natural resource abundance has a net negative impact on economic complexity. This result is robust to several alternative specifications, including the use of additional covariates; the use of alternative measures of economic complexity and natural resources; and the use of an alternative data structure. (ii) A heterogeneity analysis of our results shows that the effect of natural resource abundance differs by level of development, with natural resources having a negative and significant effect only in developing countries. (iii) When looking at the role of regime type, the results show that democracies (whether electoral, liberal, deliberative, participatory, or egalitarian) mitigate the negative effects of natural resource abundance on economic complexity. (iv) When decomposing our sample into parliamentary and presidential democratic regimes, the results show that only parliamentary democracies mitigate the negative effects of natural resource abundance. (v) Finally, however, further analysis reveals that parliamentary democratic regimes, whether left-wing or not, are more effective in mitigating the negative effects of natural resource abundance than left-wing presidential democratic regimes. Policy implications are drawn from these results.